In March 2010, Finance Minister Colin Hansen issued a three-year service plan and Ministerial Accountability Statement. In it, he makes various assertions. One is a forecast that 2010 Public Accounts will be issued in compliance with Canadian Generally Accepted Accounting Principles (GAAP).
In separate target declarations, Hansen stated his Ministry’s intention of issuing public accounts for the years 2011, 2012 and 2013 that are in compliance with GAAP. Later in the report, the Finance Minister declares that issuance of financial statements in compliance with GAAP is,
“. . . an indication of the transparency of government in accounting for its finances.”
“. . . the Ministry strives to provide an accurate and fair representation of the government’s financial position in accordance with Canadian generally accepted accounting principles (GAAP). To validate this position, government seeks an independent audit opinion that offers an objective assessment of its financial reporting.
Today, the Auditor General of British Columbia issued Report 2: Observations on Financial Reporting: Summary Financial Statements 2009/10.
- The Auditor General denied an unqualified audit opinion on the Summary Financial Statements because the statements do not comply with generally accepted accounting principles (GAAP). All three of this year’s reservations were also included as reservations last year. First, oil and natural gas producer’s royalty credits are inappropriately being netted from revenue rather than being reported as expenses. Second, government is not recording liabilities for deep-well credits owed to oil and gas producers. The third reservation is the improper consolidation into the Summary Financial Statements of the Transportation Investment Corporation (TIC). Consolidating the accounts of the TIC using the modified equity method rather than the line-by-line method results in significant differences in the financial statement balances.
- Accounting by rate-regulated entities such as the BC Hydro and Power Authority is a significant issue. If government had not been permitted by current accounting standards to defer certain expenses, the annual deficit would have been about $700 million higher this year.
- The government’s response to changing accounting standards included an amendment to the Budget Transparency and Accountability Act that provided government with the flexibility to change how it defines generally accepted accounting principles.
- Government has improved its management of working capital by reducing its cash and temporary investment balances from about $7 billion as at March 31, 2009 to $3 billion as at March 31, 2010, but it can still do better.
We see that Mr. Hansen promises in March to comply with GAAP but, barely three months later, he issued financial statements for the province that are not in compliance. The differences are material, inexcusable and not new. The government was not in compliance in 2009 with GAAP and had no intention of being in compliance in 2010. So what led Hansen to issue the three year service plan in March that promised compliance? Government did not change its position between March and July. They have been refusing the Auditor General’s demands on these same issues over a number of fiscal years.
Categories: BC Liberals